TMI Blog2012 (9) TMI 1149X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of ₹ 7,92,38,939/-. The return was processed under section 143(1) of the Income Tax Act, 1961 ('the Act' for short) initially and scrutiny assessment was made by the Assessing Officer. During the course of the assessment proceedings, the Assessing Officer observed that, It is seen that as on 31/03/2008 and 31/03/2007 the Assessee Company is having 'Investments' to the tune of ₹ 52.51 lakhs and is having secured loans to the tune of ₹ 2,342.72 lakhs. The Assessee Company has claimed an expenditure of ₹ 280.77 lakhs towards Interest and the corresponding interest as on 31/03/2007 is to the tune of ₹ 258.57 lakhs. The Assessing Officer asked the assessee to explain why sec. 14A of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ively and submitted that the assessee has not borrowed any amount for the year under consideration for the purpose of investments in shares. 5. On the other hand, the learned DR supported the order passed by the authorities below. 6. We have heard both the sides, perused the records and gone through the orders of the authorities below. The case of the Assessing Officer is that the assessee has incurred interest expenditure towards term loans and others and according to him the interest expenditure was incurred on borrowings which were used for the purpose of investments. The learned CIT(Appeals) confirmed the same. According to the assessee, no borrowings were used for the purpose of investments on shares and the learned counsel for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... royalty, fees for technical services or other sums chargeable under the Act are payable outside India or in India to a non-resident, then such payment made, without deduction of TDS, cannot be allowed as a deduction while computing the profits and gains of business u/s 30 to 38. Since these payments have been made to non-residents in foreign countries, provisions of sec. 195 of the Act are attracted. The assessee also failed to file an application under section 195(2) and 195(3) and it is the statutory obligation of the person responsible for paying such sum to discharge the obligation of tax deduction at source and the onus is on the assessee to prove that the payment is not chargeable to tax. The assessee has not discharged the obligatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has to deduct TDS. Nothing was brought on record. There is nothing in the assessment order that there is a business connection and that the assessee has to deduct TDS u/s 195 of the Act. Under similar circumstances, the Hon'ble Delhi High Court in the case of CIT v. Eon Technology P. Ltd. (343 ITR 366) has held as under: Held, dismissing the appeal, that the Assessing Officer had not dealt with or examined whether the commission income accrued or arose directly or indirectly from any business connection in India but had merely recorded that the payment made to the U.K. company was taxable in India because of its 'business connection . The Assessing Officer did not elaborate or had not discussed on what basis he had come t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the present case are identical to the facts in the decision of the Hon'ble Delhi High Court in the case of ITA 1434/Mds/2012 CIT v. Eon Technology P. Ltd. (supra). The Hon'ble Delhi High Court while considering section 40(a)(ia) of the Act and the CBDT circular No. 23 dated 23-7-1969 and circular No. 786 dated 7-2- 2000 has held that business connection was not established and therefore no TDS has to be deducted. In the present case also, the Assessing Officer has failed to establish the business connection. We, therefore, respectfully following the decision of the Hon'ble Delhi High Court in the case of Eon Technology P. Ltd. (supra) hold that the assessee has no liability to deduct TDS. 13. Insofar as the concurrence f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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